'Mid-East Middleman' on The Egypt Crisis and What It Means for Business

Fear has taken a grip over the markets as images of rioting in Egypt dominate television screens and headlines.

The Proverb quote, “Better the Devil you know than the Devil you don't" is applicable because of the many unknown questions surrounding the "what ifs" of Mubarak stepping down, who would take his place and if the Suez Canal will remain open.

I decided to speak with one of my close contacts, who many CEOs coordinate with when working in the Middle East. He is often refered to as the "Mid-East Middleman".

His name is Mac McClelland, CEO of Center House Limited, which provides business development and business advisory services in the Middle East and Asia. McClelland is also the President and Chief Executive Officer of The Middle East Luxury Marketing Council and the former General Manager of Enron Middle East. I have been calling Mac since the days of "Shock and Awe" and his insight and depth of contacts into the region is why so many C-Suites call on him to help navigate through the volatile region.

LL: Egypt is the entry point into the entire Arab World. There are other events going on in Jordan and Yemen, are you worried this could create a ripple effect and lead to disruptions to Middle East Commerce?

MC: As the most populous Arab country with about 85 million people it is also an important ally to the U.S. Part of the unrest in Egypt is over President Mubarak’s ties to the United States and the support he receives from our government.

Tunisia kicked off the chain of events that has already rippled through the Middle East and North Africa, with rioting in Yemen, Lebanon, and Jordan. Because news in the region tends to be controlled by the respective governments, little reporting will be allowed of any unrest, or at least attempts to suppress what goes out.

The biggest commerce centers are in the wealthier Gulf countries with Saudi Arabia being the largest. If no unrest occurs in the Gulf, business should continue unhampered by what’s happening in the region.

The incident in Pakistan where a U.S. State Department officer shot and killed two men who were attempting to intercept his car could also be a flash point that could incite more unrest. Although they are not Arabs, there are Pakistani workers in most countries of the Middle East that could present challenges to the local governments.

LL: U.S. crude futures surged more than 4 percent, how high do you think the price of oil can go with this unrest?

MC: Such surges are more emotional than real even as they attempt to predict oil prices well into the future.

There may be short-term spikes in crude oil prices but it is not in the best interest of the oil producing countries to let the price remain high for very long. If they do so, demand will slow, alternative fuels will move to the front burner again, and any goodwill they have will evaporate.

LL: Egypt controls the Suez Canal where over 35,000 ships pass through in a year and Sumed Pipelines where an estimate 3 million plus barrels of oil pass through those pipelines on a daily basis- how at risk is the world's energy security?

MC:Egypt has always been careful to keep the Suez Canal open to shipping and transportation of oil and natural gas; that should not change. Prices will go up because of increased insurance rates, but should return to pre-crisis levels within a few weeks—unless the unrest continues unabated.

LL: The Egyptian government has hut down their telecommunication networks. Do you think the government is willing to shut down their entire oil and gas sectors?

MC:There is no benefit to Egypt shutting down its oil and gas networks, and they are removed from the population centers where the unrest is taking place. Oil revenues pay for many government services such as the military and police; by shutting off their funding, the government risks alienating the two entities that help keep stability and respond to unrest.

LL: If rioters are successful and oust Mubarak, the big question that is hanging out there is how the next regime will use the country's oil and natural gas resources. What are the implications of such a change?

MC: The next government will continue producing and exporting oil and natural gas. Of interest will be where President Mubarak goes if he leaves Egypt; many countries will turn him away for fear of inciting retaliation within their own countries and from abroad.

As has happened with former Tunisian President Bin Ali, there would probably be calls for his extradition and return to Egypt to face trials; oil producing countries will be reluctant to put their production facilities at risk of attacks and interdiction.